I’m the Washington D.C. bureau chief for Forbes and have worked in the bureau for more than two decades. I've spent much of that time reporting about taxes -- tax policy, tax planning, tax shelters and tax evasion. These days, I also edit the personal finance coverage in Forbes magazine and coordinate outside tax, retirement and personal finance contributors to Forbes.com. You can email me at jnovack@forbes.com and follow me on Twitter @janetnovack.

Memo To Mitt Romney: The 47% Pay Taxes Too

A secret videotape of Republican Presidential candidate Mitt Romney talking at a private fundraising event earlier this year could revive—in virulent form— the debate Texas Gov. Rick Perry started last year when he complained of “the injustice that nearly half of all Americans don’t even pay any income tax.” The video, leaked to left-leaning Mother Jones(excerpts and a report here), captures the normally cautious Romney at his most candid and impolitic.

Here’s part of what he had to say:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax….”

Political suicide? I’ll leave it to the pundits to analyze the impact Romney’s comments will have on his election prospects. (It should be noted, however, that while Romney does have an edge among high-income voters, billionaire Warren Buffett is hardly the only rich guy supporting the Democratic incumbent. See Millionaire Towns For Obama.)

But since I write about tax and budget issues, let me make a few serious points about the 46.4% of American households who paid no federal income taxes for 2011. First of all, according to the Tax Policy Center, more than 60% of those non-income tax paying households did pay federal payroll taxes—meaning Social Security and Medicare taxes. (Considering all Americans households, including those that owed income tax, 62% paid more in payroll taxes than in federal income taxes.)

What of the 18.1% of U.S. households that paid neither income nor payroll taxes? More than half of them were headed by a senior–in other words, by someone who paid payroll taxes and likely some income taxes too, in the past. (No, the amount the elderly have paid in does not cover the cost of the Medicare benefits they are now getting. And that is true despite the fact that in a Romney TV ad attacking Obamacare’s cuts to the growth in Medicare spending, an announcer seems to suggest otherwise, intoning: “You paid into Medicare for years, every paycheck…. So now the money you paid for your guaranteed healthcare Is going to a massive new government program that’s not for you.”)

Of course, it goes without saying, that those folks who aren’t paying federal taxes are almost all paying state and local taxes—state sales taxes, real estate taxes (either on their homes or built into their rents) and possibly state income taxes too, since those taxes tend to exempt fewer poor families than does the federal income tax. If they buy gasoline, liquor or tobacco, or have telephones, they’re also feeding the federal purse.

Yes, there’s a serious tax policy issue here. The percentage of households owing federal individual income taxes has fallen in recent years in part because both Republicans and Democrats have looked to provide help for working families through the child credit, the earned income tax credit and other “tax expenditures,” rather than through more direct spending programs. That might not be the best way to do things. But note again that the largest group excluded from paying income tax because of special tax expenditures are seniors, who get a bigger standard deduction than younger folks and more importantly, special tax treatment for their Social Security benefits. As I explain here , Tax Policy Center researchers calculate that 16.7 million elderly households will pay no tax in 2011 because of those two breaks and a special low income credit for the elderly. By comparison, the earned income tax credit, the child credit and the child care credit combined keep only 11.5 million households with kids from paying income tax.

So maybe a higher share of the American public should be paying at least some amount of federal income tax. The tax code would be simpler, and probably fairer, if we reduced the number of tax expenditures for the wealthy and non-wealthy alike. We all might give more thought to spending restraint. Then, too, we’re all protected by the military and rely on public infrastructure to get to our jobs, schools, stores and doctors—and yes, to build our businesses.

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This from a man who last year got a $70,000 tax deduction for his wife’s hobby horse.

How do we know Romney isn’t in the 47% who paid no taxes? He won’t reveal any but the most recent two years of his tax returns. Maybe he’s hiding the fact that he’s one of the 47% who expect things from the government — things like massive tax breaks. Talk about government dependency, millions of “welfare” for the super-rich.

By the way, what percentage of the 47% are the wealthy, those who can afford to use loopholes and tax dodges to avoid paying any tax? How many, Mitt?

We Dems have to use such callous disregard by Mitt to go vote in droves and make sure this guy never comes near the White House.

I agree… who gets $70,000.00 in tax deductions?? Can I deduct what I spend on my DOG?? He needs lots of grooming, and teeth work.. not to mention special food. What makes her horse so special?? And, if they win, can we always expect Ann to be a no show due to her horse shows??

For the sake of fairness, he got a $500 deduction for the horse, not 70k.

“In 2010, the only complete year of tax returns that the Romneys have released publicly, the couple was able to deduct only $50 of more than $77,000 in losses related to the horse business.” (http://www.bloomberg.com/news/2012-07-27/romneys-have-tax-deduction-with-olympic-hopes-on-rafalca.html)

Mitt Romney did not have anything to do with the the horse law, in fact, cheap politicians did. Instead of blaming someone whose accounting firm took that deduction blame the politicians who created.

It’s like blaming the railroad worker who gets far more in social security than I ever will, even though I have worked just as hard as he has.

This article saying that the 47% do pay federal taxes isn’t complete right. Paying into social security and medicare is money that comes back to those that pay into it (even though they will get less social security than they paid in thanks to the government being so good at investing). Mitt Romney has paid into it, even though he will get virtually nothing from it.

What Romney was talking about is welfare, food stamps, Section 8 housing, Medicaid other similar programs. Nearly 1/3 of the population is on some form of those programs, depending on a smaller and smaller number of Americans to take care of them.

Also, to those that say that Romney doesn’t pay any taxes shows that you definitely are not a CPA. It would be hard to get his federal income tax rate to nothing no matter how much he donated and other “horse deductions” (in the years he was making the bulk of his wealth). Also, his accounting firm (PWC) had probably dealt with Mitt Romney being audited numerous times, so he wouldn’t get away with anything illegal.